Equity Release

As lifestyles change an increasing number of people are looking to borrow into retirement.

Let’s look at how lenders have reviewed their age limits in response to growing consumer demand

For those people looking for a mortgage that runs into retirement, securing finance can often be tricky.

As the population is ageing and with an increasing number of people nearing retirement or already retired still looking to borrow in order to purchase a property or to fund their lifestyle.

The older borrower needs to be able to prove to the lenders they have the income to afford loans, not just when it’s taken out, and many hit a brick wall.

More robust regulation measures such as the Mortgage Market Review,  introduced in 2014 brought in stricter affordability checks, have also made it more difficult for older borrowers to get a mortgage as lenders do not want to be seen as being irresponsibly.

Rising house prices and deposits has meant people are increasingly buying a property later in life and will also need to borrow for longer.

Recent research from Halifax found that delays in getting onto the housing ladder are leading to increasing worries about retirement.

Help is at hand though. Many building societies have pledged to review their maximum age limits.

Last November, the Building Societies Association (BSA) launched a year-long review to lending into retirement to help older people get a mortgage.

Paul Broadhead, head of mortgage policy at the BSA, said: “Financial services have got to evolve to meet consumer demand.

Age limits

According to the BSA, 27 building societies will now lend up to 80, 85 or have no maximum age limit.

The pension reforms could have a huge impact on the ability of older borrowers to repay their loans.

Warning

Critics argue that some borrowers may have problems paying back their loans once they reach retirement age.

Equity release

More people than ever before are looking to borrow in retirement to help full fill their lifelong ambitions and dreams. This can range from home improvements, a holiday abroad or helping grandchildren with a deposit for a house.

One solution for those that can’t get a loan is equity release, which allows you to gain access to the wealth tied up in your property without having to sell or move home. Designed for older homeowners 55 plus who own their property outright or have relatively small mortgages to repay.

A lifetime mortgage is a type of equity release which you can use to extract your funds in a single lump sum or in smaller amounts over time through what is known as drawdown. Alternatively, home reversion plans allow you to access all or part of the value of your property while retaining the right to remain in it rent free.

Where does the lifetime mortgage come in? We are seeing changing attitudes from our customers which leads me to believe the market is growing.

You can borrow against the value of your home; sell it or part-exchange it for a lump sum or a regular monthly income to support your life choices.

We are seeing a lot more people looking to raise funds for a number of reasons, some because they simply cannot borrow through other channels.

There is huge growth in people coming to us who want to raise money on their homes to give some money to their children.

Lifetime Mortgage

A percentage of property value is released as cash or income, you continue to live in and own the property; until death or you go into long term care. Interest is charged on the amount released.

  • Suited to homeowners over the age of 55.
  • Who wish to retain ownership
  • Money for any purpose
  • No monthly repayments
  • Right to remain in the property
  • Portable to another property
  • Secured by a charge on the property

You take out a Lifetime mortgage no repayments are required, interest rolls up and is repaid either by sale of the home or other means any balances will go to you or your estate. You might choose to repay the interest.

You benefit from capital value growth in the property as you still own the property.

Releasing capital may affect your entitlement to means tested state benefits.

It is a long-term commitment and will reduce the inheritance available to your family. This can be a benefit for some who might be subjected to Inheritance Tax charges.

This is a lifetime mortgage. To understand the features and risks please ask for a personalised illustration.

A Lifetime Mortgage will reduce the value of your estate, will not be suitable for everyone and may affect your entitlement to state benefits.

Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice

Home reversion scheme

Home reversion involves the sale of all or part of the property in exchange for cash or income and the right to reside for as long as you wish rent free. Till death or long term care is needed.

  • Suited homeowners over age 65
  • Money for any purpose
  • Right to remain in the property
  • You will not own the property
  • Generally a larger lump sum paid
  • Can retain a share of the property
  • Portable to another property

You sell all or part of the property, no repayments are required and no interest is rolled up. House is sold on death / entering into long-term care or at your request the remaining share if any will then pass to your estate.

No benefits from growth unless you have a percentage share ownership.

Releasing capital may affect your entitlement to means tested state benefits.

This can affect the inheritance you leave behind and can in some cases be used to reduce tax burdens through timely disposal of assets.

This is a home reversion plan. To understand the features and risks please ask for a personalised illustration.

A home reversion plan will reduce the value of your estate, will not be suitable for everyone and may affect your entitlement to state benefits.

These plans may appear very much the same, but the differences are great and can be suited to very differing situations. We offer advice and guidance in what will be a massive decision, reviewing a wide range of products to assure you of the best deal suited to your situation. Making the decision easier and considering all the alternatives. You can continue to enjoy your home and your lifestyle without the worry.

The equity release council approval means that if prices fall you will never owe more than the value of your home.(No negative equity guarantee)

AN EQUITY RELEASE PRODUCT WILL REDUCE THE VALUE OF YOUR ESTATE, WILL NOT BE SUITABLE FOR EVERYONE AND MAY AFFECT YOUR ENTITLEMENT TO STATE BENEFITS. TO UNDERSTAND THE FEATURES AND RISKS PLEASE ASK FOR A PERSONALISED ILLUSTRATION.